The game begins with the laying down of the starting tile, which depicts the kinds of tapeworms stitched together. The first turn is either determined by who resembles a worm the most or at random. A player's turn includes the drawing and laying down of matching tiles, which continues until a matching head segment is laid down, thereby completing the tapeworm. Whichever player ends up with an empty hand wins the game.
There are special mechanics to propel a player forward, as well as cards intended to hinder the efforts of their opponents. These cards include: Cut, to sever a worm segment at play; Peek, to draw a card and replace it with another card from a hand; Hatch, to force an opponent to draw from the deck; Swap, to look at an opponent's hand and decide if cards should be traded; Dig, to draw a card from the deck and discard one from a hand. If a player creates a fully-connected ring of cards, it is identified as a Ringworm, resulting in the discarding of two cards from a hand.
McMillen developed the prototype for Tapeworm alongside The Binding of Isaac in 2011, after releasing Super Meat Boy. For years, McMillen would play the game privately with family and friends, without pursuing it professionally. In 2018, Studio71, the publisher of The Binding of Isaac: Four Souls, was visiting McMillen to document the completion of the game, they were shown Tapeworm. Studio71 tested the game and began the process leading up to publishing it.